What Did Mitt Learn At Bain?

Mitt Romney (or someone) writes (or writes for him) in Murdoch/Al-Waleed’s Wall Street Journal, that lessons he learned at Bain Capital will help him turn the country around if he is elected President. Is he right?

In the piece, Romney uses a lot of “code words.” For example, he writes that he will “give every family access to great schools and quality teachers.” This is code for privatization, meaning he will help dismantle public schools and give people vouchers for private schools instead, just like his Medicare plan. He writes that he will, “make it easier for entrepreneurs and small businesses to get the investment dollars they need to grow, by reducing and simplifying taxes” meaning give even more tax cuts for the wealthy few, and “stemming the flood of new regulations” meaning getting democracy’s pesky protections for people’s health and safety and the environment out of the way.

Much of what Romney writes is, of course, great and impossible to argue with. Millions upon millions in corporate campaign cash give him access to the best persuasion messaging that focus groups and polling can come up with. He will tell you exactly what you want to hear. But what happens when you look deeper?

Finally, being Romney, he just lies, writing, “President Obama has piled on excessive regulations, proposed massive tax increases, added more than $5 trillion in federal debt, and failed to address the coming fiscal cliff—all of which is miring our nation in sluggish growth and high unemployment.” It was the very Bush policies that Romney advocates returning to, that caused the financial collapse, recession, high unemployment and debt. Before Bush we had a great economy and we were paying off the debt.

Staples, For Example

In So DID Mitt Romney Really “Create Jobs” At Staples? I looked into the claim that Romney “created” 100,000 jobs by starting the company. What really happened was that Romney’s company followed the Wal-Martization model, using the advantages that come with having large, national chains, putting a number of local, smaller businesses out of business, while shifting a lot of people into lower-paying jobs. From that post,

Staples grew into a major chain because they consolidated what different kinds of stores sold, offering a one-stop-shop for stationery products, office supplies, office-furniture, computers, etc. They also were able to be competitive because of the advantages of scale as they grew into a national chain, centralizing functions like accounting, purchasing, legal, marketing, etc. And never underestimate the power of having a ton of cash at your disposal. This is all just smart business, well executed.

As Staples grew it overtook competing chains like Businessland and others. In other words, Staples took business from other, existing stores — often local retailers. Staples did not “create” jobs, it shifted office-supply jobs from local stores, etc., probably to lower-paying jobs. (The former owners of local businesses certainly were worse off from this.) They likely even lowered overall office-supply, stationery, etc. employment in the larger economy.

This is in many ways just smart business. But it is so important to understand that this is not in any way about creating wealth in ways that help all of us, building up industries and helping communities and the country and the larger economy. It is about taking advantage of various loopholes and innovations that allow a few to shift wealth from the many to themselves. “Shift” is the key word, there is a difference between creating wealth and shifting wealth.

“Good Business”

So what are the “good business” practices that Romney promises to extend to the entire country?

If you can manufacture at a lower cost in another country, closing the factory here, laying the people off, devestating the surrounding community, that is “good business.”

If you can find ways to reduce staff and reduce the pay of the rest, that is “good business.”

How do these”Romney job creator” jobs stack up against other jobs? Average Staples salaries for job postings nationwide are 51% lower than average salaries for all job postings. The pay at Staples appears to be around $8-10 an hour. That’s $16-20,000 a year, certainly not enough to support a family, or even pay rent in many areas, never mind buying food. (The 2012 poverty guideline for family of four is $23,050.)

If you can find ways to scam the tax system to increase your own return on investment, that is “good business.” Private-equity companies like Bain Capital borrow tremendous amounts using the assets of the acquired company as collateral, immediately passing much of the borrowed money to themselves. The interest payments are tax deductible. Also,

These giant companies even have the power to squeeze communities and even states, demanding tax concessions with the threat of relocation. This has put our tax base in a downward spiral along with our wages.

If you can find ways to put smaller, local businesses out of business, that is “good business.”

As Staples grew it overtook competing chains like Businessland and others. In other words, Staples took business from other, existing stores — often local retailers. Staples did not “create” jobs, it shifted office-supply jobs from local stores, etc., probably to lower-paying jobs. (The former owners of local businesses certainly were worse off from this.) They likely even lowered overall office-supply, stationery, etc. employment in the larger economy.

About Dave Johnson

Dave has more than 20 years of technology industry experience. His earlier career included technical positions, including video game design at Atari and Imagic. He was a pioneer in design and development of productivity and educational applications of personal computers. More recently he helped co-found a company developing desktop systems to validate carbon trading in the US.